MPs voice concern at Chancellor's move to let in Chinese banks

The Treasury Select Committee has raised the alarm about the Chancellor’s landmark deal with Chinese banks.

Its chairman, Andrew Tyrie MP, yesterday voiced concerns that the Government may be relaxing financial safety rules in a bid to cosy up to the world’s most populous nation.

George Osborne this week agreed to allow the five biggest Chinese banks, including the Industrial And Commercial Bank Of China and the Bank Of China, to operate wholesale lending branches in Britain. These branches will not be allowed to accept deposits from savers.

Alarm: Andrew Tyrie yesterday voiced concerns that the Government may be relaxing financial safety rules in a bid to cosy up to China

The move is designed to allow them to boost lending in Britain by using looser regulations, including the amount of capital they have to hold.

Because it is outside the EU, China’s banks have only been allowed to operate subsidiaries which have to adhere to the same regime as British banks. They complained that this stymied growth.

The decision to allow them to set up branches means they will only have to comply with more lax rules set by Chinese regulators.

The Treasury Select Committee of MPs and peers yesterday asked whether the British government had given the Chinese special treatment and put ‘undue pressure’ on regulators to rubber stamp the deal.

In a letter to Andrew Bailey, the boss of the Bank of England’s safety watchdog the Prudential Regulation Authority, Tyrie, pictured, said: ‘I would be grateful for your assurance that the PRA was consulted about this announcement, is content with the arrangement that is proposed and, in particular, does not have concerns on prudential grounds.’

He added: ‘I would be grateful for an assurance that any change is not specific to a particular country and that you were not put under any undue pressure to agree to do something about which you may have had concerns.’

Last night the Treasury denied it had forced the PRA’s hand, saying the watchdog had taken the decision ‘independently’.